Australia Decides to Keep Bitcoin Sales Tax, Risks Double Taxation

In a blow to Bitcoin’s international presence, Australia has confirmed it will keep its controversial sales tax policy for certain Bitcoin transactions. Following the Australian Tax Office (ATO) issuing the initial legislation earlier this year, considerable community opposition arose, with domestic exchange Coinjar even forced to relocate to the UK to preserve its operations.

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In a blow to Bitcoin’s international presence, Australia has confirmed it will keep its controversial sales tax policy for certain Bitcoin transactions.

Following the Australian Tax Office (ATO) issuing the initial legislation earlier this year, considerable community opposition arose, with domestic exchange Coinjar even forced to relocate to the UK to preserve its operations.

In November, the chairman of the Australian Digital Currency Commerce Association, Ronald Tucker, told the Australian Senate the rules “could result in driving the digital currency businesses that [are] emerging in the sector offshore and potentially underground,” but his warnings appear to have gone unheeded.

Now, the existing legislation is due to become permanent as GSTR 2014/3, a slightly amended version of the DSTR 2014/D3issued previously. Bitcoin transactions involving conversion to fiat will be subject in many cases to Australia’s general sales tax (GST), including some instances where a transaction is taxed twice, depending on the circumstances.

Exchanges converting between digital and fiat currency have already faced the ultimatum of paying GST and passing on the costs to customers, or moving outside the country. Coinjar, which prior to the legislation was entrenched in the local Bitcoin scene and offered a variety of consumer finance products, initially announced it would stay resident and pay, but opposition to this soon caused a U-turn.

An announcement earlier this week indicating digital currency-exclusive exchanges would not require a financial services license provided little respite, as hardly any enterprise operation exists in which fiat currency is not part of the financial cycle.

Additional recent criticism of Bitcoin came in the form of a submission by MasterCard to lawmakers, which argued that full regulation was necessary for Australia’s “market leadership” and “consumer protection.”

“It's like they're setting the entire country up to provide zero innovation,” a popular Reddit response reads in light of the ATO announcement.

Users were also quick to point out the double tax issue, in which a merchant selling a taxable item such as alcohol would then also have to pay tax on the Bitcoin paid by the customer. The Bitcoin GST could only be avoided by spending the money abroad or on items purchased abroad, entrepreneur David Moskowitz writes.

The main effect of GST maintenance is likely to be the increasing exodus of Bitcoin-affiliated business from Australia, which now becomes one of the more unfriendly developed-world environments in which to transact in digital currency from a merchant standpoint.

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